Poppenberg v. R. M. Owen & Co.

[2, 3] Of course, if the defendant failed to fulfill some of the stipulations of the contract, and the plaintiff suffered damage by reason of such failure, the plaintiff was entitled to maintain an action for such a breach. The court so charged the jury, but the plaintiff neither alleged in his complaint nor proved on the trial any damages resulting from the failure of the defendant to manufacture or deliver the “Model K” roadster, or any other of the cars covered by the agreement. In fact, I recall no evidence in the case where any shipping orders for such roadsters were given. The contract having been continued ip force and effect by the parties, and acted upon by them during the term of its life, the plaintiff is now in no position to say that the defendant cannot recover for breaches on its part. Deeves & Son v. Manhattan Life Ins. Co., 195 N. Y. 330 , 88 N. E. 395 ; Ruff v. Rinaldo, 55 N. Y. 664 ; Granniss & Hurd Lumber Co. v. Deeves, 72 Hun, 171 , 25 N. Y. Supp. 375 , affirmed 147 N. Y. 718 , 42 N. E. 723 ; Beyer v. Huber Co., 115 App. Div. 344 , 100 N. Y. Supp. 1029 ; Crocker-Wheeler Co. v. Varick Realty Co., 104 App. Div. 570 , 88 N. Y. Supp. 412 , 94 N. Y. Supp. 23 ; Sinclair v. Tallmadge, 35 Barb. 602 -606; Rogers v. Beard, 36 Barb. 31 ; Ming v. Corbin, 142 N. Y. 334 , 37 N. E. 105 ; Tipton v. Feitner, 20 N. Y. 425 ; Secor v. Sturgis, 16 N. Y. 548 . All that could be claimed by the plaintiff under such circumstances was the right to recover for the defendant’s breaches, and in this case the damages, if any, were at best purely nominal, so far as the evidence discloses., ■

[4] It is further contended, on the part of the plaintiff, that the defendant cannot recover for the failure of the plaintiff to take and pay for the automobiles agreed to be purchased, for the reason that the defendant never tendered the cars not taken, and that without such a

In order to fully understand the question presented and the ruling made, it is necessary to examine the provisions of the contract between the parties. This agreement recites that:

“In consideration of an order for 420 Reo motor cars placed by the party of the second part with the party of the first part, the party of the first part grants to the party of the second part the exclusive right to sell all styles of Rea motor cars”

—in certain territory embracing all Western New York. The contract provides that the plaintiff was to take a certain number of cars each month; 4 in August, 21 in September, 21 in October, 11 in November, 9 in December, 18 in January, 39 in February, 75 in March, 79 in April, 82 in May, 42 in June, and 19 in July. The different types and styles of motor cars, and the number of each type were specified. It was also provided that:

“Shipping specifications for each month’s allotment of cars must be given . the party of the first part by the party of the second part [i. e. the plaintiff] 30 days in advance. If shipping specifications are not in factory thirty days prior to the above monthly delivery table, then the party of the first part reserves the right not to furnish the above-specified allotment for the month in question.”

The contract further provided the plaintiff should sell only the cars sold by the defendant; that the plaintiff should not invade other territory than that given him, and agreed to refer all inquiries outside that territory to the defendant. He also agreed to appoint subagents for properly handling the business contemplated, and-to report the names and addresses of all purchasers of Reo cars, and to, provide ample facilities' for handling, adjusting, and repairing machines sold to purchasers. It will thus be seen that the contract was not simply for the purchase of a given number of cars, but for an exclusive agency, in which the plaintiff was to represent.the defendant and push the sale of its cars.

It was further provided that after the receipt of shipping specifications, the “shipments to be made sight draft against bill of lading f. o. b. Lansing, Mich.’ The shipping specifications in use provided for the number of cars, the manner of shipment, by what route, the place of delivery, and to whom delivery was desired, directions as -to how to draw draft,- and other details.

The defendant had the exclusive sale of the entire output of the Reo Manufacturing Company, and it was evident that the provisions of the contract were framed as they were in order to give the defendant opportunity to meet the requirements of the plaintiff by, in turn, placing the orders received from him with the Reo Company, the manufacturer.

It will thus be seen that by the very terms-of the contract the defendant could make no shipment, or draw any draft for a shipment,

The evidence shows that the defendant was constantly and emphatically demanding of the plaintiff that he furnish such specifications, and that it was ready at all times to fill, and actually did fill, all orders received, for which specifications were sent. The plaintiff, on his part failed and omitted to perform the duty imposed bv the contract on him. It was an act imposed on the plaintiff as a condition precedent to the duty or right of the defendant to ship.

The facts in this case bring it fairly and squarely within the decided case of Gordon Malting Co. v. Bartels Brewing Co., 206 N. Y. 544 , 100 N. E. 462 , where Judge Werner, speaking for the court, said:

“The subject-matter of the contract was such that it was not necessary for the plaintiff to make a physical tender. Shipments were to be made, moreover, according to directions from defendant, and when it refused to give such directions after request by the plaintiff the breach was complete.”

See, also, Atkinson v. Truesdell, 127 N. Y. 230 , 27 N. E. 844 .

We, therefore, think the point that a physical tender of the cars agreed to be purchased was unnecessary, and the plaintiff’s exceptions to the rulings of the trial court not well taken.

The remaining questions raised on this motion relate to the measure of damages, which should control the defendant’s recovery.

The plaintiff contends that the contract betwen the parties limits the recovery to the deposit made by the plaintiff, and further insists that, if such is not the case, the rule laid down by the trial court for the guidance of the jury was erroneous.

We proceed tp a consideration of these questions in the order presented, and call attention to clauses 14, 15, 16, 17, and 18 of the com tract, which provide:

“14. It is mutually agreed that the following terms of payment shall prevail in the matter of all orders, viz.:

“15. The party of the second part shall deposit with the party of the first part, at the signing of this contract 1500 dollars on each machine, which amount will be placed to the credit of the party of the second part; shipments to be made sight draft against bill of lading, f. o. b. Lansing, Mich.

“16. Accounts for parts and accessories ordered by the party of the second part shall be due and payable at the office of the party of the first part in Lansing, Mich., on or before the tenth of each month for goods ordered during the preceding month. If the party of the second part fails to remit as heretofore provided the party of the first part is hereby authorized to apply in payment of said parts account any cash deposits held by the party of the first part for account of the party of the second part, and until such deposits are restored by the party of the second part there shall be no deduction of deposits theretofore made.

“17. The party of the first part agrees, that if credit is passed to the party of the second part for parts returned and parts account has already been paid

by the party of the second part, it will, upon request, immediately send its check to the party of the second part for such credit memorandum.

“18. And it is hereby expressly agreed that in case the party of the second part shall neglect or refuse to accept or to pay for any car or cars which the party of the second part has theretofore specified, then and in that case all deposits theretofore made by the party of the second part shall belong to and be the property of the party of the first part as liquidated damages for the breach of this contract.”

[5] When the contract was executed, the plaintiff deposited with the defendant the sum of $1,500. At the time the contract, by its terms, expired, a balance of $986.92 remained in the defendant’s hands. The plaintiff contends that any right of recovery on the part of the defendant was, by the terms of the contract, limited to that amount as liquidated damages. It is perhaps sufficient answer that this contention is made for the first time on this motion for a new trial. It was not raised upon the trial; but, on the contrary, the plaintiff’s counsel proceeded upon an entirely different theory as to the rule which should be applied in the disposition of the case. After taking exception to the rule as given to the jury by the court, plaintiff’s counsel requested the court to charge that if the jury awarded damages to the defendant upon its counterclaim, “the measure of damages would be the difference between the contract price and the market price at the time and place of delivery.” The court refused to charge the proposition. The request, however, shows that no claim was made on the trial that the defendant’s damages were limited to the amount of the deposit in the defendant’s hands as liquidated damages. Nor was the question raised by any allegation in the plaintiff’s reply to the defendant’s counterclaim. If the plaintiff had desired to stand on the proposition that the damages were limited to the deposit in the defendant’s hands, he should have raised the question on the trial, and insisted on the rule as now claimed; otherwise he will be deemed to have waived his right. In other words, the plaintiff, by the position he took upon the trial, assumed and proceeded upon the theory that the defendant, if entitled to recover at all, was entitled to recover substantial damages, uncontrolled and unrestricted by the clause of the contract now insisted upon. It is a well-recognized rule of law that on an appeal, a case must be disposed of upon the theory upon which it was tried. Hicks v. British Am. Assur. Co., 162 N. Y. 284 -290, 56 N. E. 743 , 48 E. R. A. 424; Caponigri v. Altieri, 165 N. Y. 255 -263, 59 N. E. 87 ; Daley v. Brown, 167 N. Y. 389 , 60 N. E. 752 ; Vann v. Rouse, 94 N. Y. 401 ; Wellington v. Morey, 90 N. Y. 656 ; Tyng v. Corp. Trust Co., 104 App. Div. 486 , 93 N. Y. Supp. 928 . We, therefore, think the question cannot now be raised for the first time on this motion for a new trial.

[6] Irrespective, however, of the question as to whether the point raised is available to the plaintiff on this motion, we are of the opinion that the defendant’s recovery was not limited to the deposit in its hands.

The fifteenth clause of the contract provides that:

“The party of the second part [the plaintiff:] shall deposit with the party of the first part [the defendant] at the signing of the contract, §1,500 on each machine, which amount will be placed to the credit of the party of the second ’ part; shipments to be made sight draft against bill of lading, f. o. b. Lansing, Michigan.”

In addition there is attached to the contract a letter from the defendant to the plaintiff, in which reference is made to clause 15 of the contract, in which it is provided that when one-third of the cars ordered are delivered, one-third of the deposit is to be returned, and when two-thirds of the cars have been delivered, $500 is to be returned, and the balance at the completion of the contract. The parties have certainly left these provisions in a hopeless jumble so far as the wording of the contract is concerned. So far as the literal reading is concerned, we have an agreement to put up $1,500 on each machine at the time of the signing, modified by the letter that one-third of the amount is to be returned when one-third of the machines have been delivered, $500 when another third has been delivered, and the balance on the completion of the contract.

The eighteenth clause of the contract as to liquidated damages should be read and interpreted in the light of the agreement as made, notwithstanding that a strict and literal compliance was not insisted on by the defendant. When, therefore, the eighteenth clause provided:

“And it is hereby expressly agreed that in case the party of the second part shall negelect or refuse to accept or to pay for any car or cars which the party of the second part has theretofore specified; then and in that case all deposits theretofore made by the party of the second part shall belong to and be the property of the party of the first part as liquidated damages for the breach of this contract”—

it may be argued that the parties had in view the entire deposit agreed to be made, of $1,500 on each car of the 420 agreed to be taken. This amount would more than have indemnified and saved the defendant harmless from any loss or damage it could have sustained by reason of any failure to accept drafts, or pay for machines shipped, or which he had contracted to buy.

In any event, can the plaintiff stand on the strict letter of the contract and now insist that the small balance in the defendant’s hands must be accepted and deemed the total recovery to which the defendant is entitled when that small unexpended balance was due to the failure of the plaintiff himself to comply with the strict letter of the agreement as to the amount to be deposited, owing to the indulgence of the defendant in not insisting on a strict compliance with its terms on the plaintiff’s part at the time of signing? If the plaintiff is to insist on the letter of the contract, and stand on the proposition that

If, on the other hand, the contract between the parties is to be construed as fixing an amount as liquidated damages for the failure to pay for each particular car shipped pursuant to shipping specifications given, then it is plain that such damages do not relate to or cover a general breach of the contract, such as is presented by the facts in this case, and the recovery cannot be limited to the amount of the particular deposit. Whether the contract is susceptible of this latter interpretation or not, it is sufficient for the purposes of this case to say that whichever of the two interpretations is to prevail, neither of them aid or assist the plaintiff in his contention.

[7] It, however, may be said as a general proposition, that courts are disposed to regard with disfavor agreements by which the damages of parties to them are fixed at stated amounts, regardless of the actual losses sustained. Such agreements have been held valid and binding in certain cases and under certain circumstances. The disposition of the courts, however, is to treat such engagements rather in the nature of a provision for a penalty than as liquidated damages, particularly in cases where the stipulated sum is clearly disproportionate to actual losses sustained, and where the actual damages are easily and readily ascertainable, as they were in the case at bar. Curtis v. Van Bergh, 161 N. Y. 47 , 55 N. E. 398 ; Hicks v. Monarch Cycle Co., 176 N. Y. 111 , 68 N. E. 127 ; Cæsar v. Rubinson, 174 N. Y. 492 , 67 N. E. 58 ; Kemp v. Knickerbocker Ice Co., 69 N. Y. 45 ; Bagley v. Peddie, 16 N. Y. 469 , 69 Am. Dec. 713 ; Cotheal v. Talmage, 9 N. Y. 551 , 61 Am. Dec. 716 .

In Curtis v. Van Bergh, 161 N. Y. 47 , at page 52, 55 N. E. 398 , at page 400, the court said:

“Where the sum agreed to be paid is so great as to be unconscionable, it will be regarded as a penalty, even i£ the parties have expressly declared their intention to be otherwise. Kemble v. Farren, 6 Bing. 141; Jackson v. Baker, 2 Edw. Ch., 471 ; Spencer v. Tilden, 5 Cow. 144 ; Niver v. Rossman, 18 Barb. 50 ; Mott v. Mott, 11 Barb. 134 ; Beale v. Hayes, 5 Sandf. 640 .”

In Hicks v. Monarch Cycle Mfg. Co., 176 N. Y. at page 114, 68 N. E., at page 128, the court said:

“The rule is that ‘when the stipulated sum is disproportionate to presumable and possible damages, or to a readily ascertainable loss, the courts will treat it as a penalty, and will rely on the principle that the precise sum was not the essence of the agreement, but was in the nature of security for performance.’ Ward v. Hudson River Bldg. Co., 125 N. Y. 230 [ 26 N. E. 256 ]; Curtis v. Van Bergh, 161 N. Y. 47 [ 55 N. E. 398 ]; 3 Parsons on Contracts (6th Ed.) 157.”

In the case of Cæsar v. Rubinson, 174 N. Y. 492 , at page 496, 67 N. E. 58 , at page 59, Judge O’Brien, speaking for the court, said:

“A provision in a contract such as that now under consideration will be treated as liquidated damages only in those cases where from the nature of the transaction the actual damages consequent upon a breach of the contract are incapable of accurate measurement, or where the sum specified in the instrument is not out of all proportion to any damages which could possibly arise from a breach. In the cases where these general features do not exist, the tendency of the courts is to treat the stipulation not as providing for liquidated damages, but in the nature of a penalty. Where the language of such a provision specifying the amount of damages to be paid in case of a breach of the contract is clear and explicit to that effect, the amount is to be deemed liquidated damages when the actual damages contemplated at the time the agreement was made are in their nature uncertain and unascertainable with exactness, and may be dependent upon extrinsic considerations and circumstances, and the amount is not on the face of the contract out of all proportion to the probable loss.”

These principles should obtain whether the stipulated amount is excessively large or grossly inadequate.

When we consider this case in all its bearings, with all the surrounding circumstances, we can reach no other conclusion than that the contention of the plaintiff that the defendant’s damages should be limited to the $986.92 in hand must be repudiated as unsound.

[8] It then only remains for us to consider whether the rule of damages actually laid down by the trial court for the guidance of the jury was the proper rule in this case. The court, in substance, charged the jury that, if the defendant was entitled to recover upon its counterclaim, it was entitled to recover the profits lost by reason of the breach; that is, the difference between the price agreed to be paid for the cars not taken and the cost to the defendant of furnishing, the cars in question. To fully understand the situation, it will be necessary to here state certain undisputed facts bearing on the question of damages. The cars agreed to be purchased were the Reo motor cars, manufactured by the Reo Manufacturing Company, of Lansing, Mich. The defendant in this action had a contract with the Reo Manufacturing Company by which it took and handled the entire output of that factory. This contract specified the prices to be paid by the defendant for the various styles or models made by that company. The defendant in turn disposed of the automobiles so purchased by it through the means of subagencies for their sale, and by arrangements with dealers throughout the United States and Canada. No cars were to be had, except through the defendant, which, in order to facilitate and advance the sale of these cars, expended many thousands of dollars in extensive advertising of these cars in various ways—by display advertisements in various journals and magazines published throughout the country, and by exhibitions in large cities. In fact the defendant may be said to have stood practically in the place and stead of the manufacturer, for it took all cars made by it, and none were to be had except from the defendant. The defendant, by this arrangement with the factory, was able to deliver to the plaintiff all the cars agreed by him to be purchased, excepting, of course, the Model K Roadsters, which we have discussed earlier in the opinion. It in fact shipped and delivered to the plaintiff every car for which the plaintiff gave any shipping specifications, and was prepared to fulfill its contract with the plaintiff in every respect

“Action for Damages for Nonacceptance of the Goods:

“1. Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for nonacceptance.

“2. The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract.

“3. Where there is an available market for the goods in question, the measure of damages is, in the absence of special circumstances, showing approximate damage of a greater amount, the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept. * * * The profit the seller would have made if the contract or the sale had been fully performed shall be considered in estimating such damages.”

This section is nothing but a codification of the common-law rules of damages long established by the decisions of the courts.

It is to be noted in the' first place in this case that there was no available market or market price of the cars agreed to be purchased. These cars- are not like staple articles like wheat or other food products, where there is an established market and a market price, and any one desiring to purchase can go into the open market and by paying the price, obtain what is desired. This was a special machine, built on special models, and after special designs, only to be purchased from the defendant in this action, which took the entire output of the factory. The price the defendant established was the price that controlled. So we have a special article of manufacture, handled only by, and exclusively by, the defendant.

In the case of Wakeman v. Wheeler & Wilson Mfg. Co., 101 N. Y. 205 , 4 N. E. 264 , 54 Am. Rep. 676 , the Court of Appeals laid down the general rule that in cases of this general nature the injured party is entitled to recover such damages as he has sustained by reason of the breach, i. e., the value of the contract, not merely imaginary or speculative damages, but such as are reasonably certain, and such only as actually follow, or might follow, from such breach, and that prospective profits, so far as they can properly be proven, and which would certainly have been realized but for the defendant’s default, are recoverable. This rule has been repeatedly applied and followed in various cases and under varying circumstances.

In Todd v. Gamble, 148 N. Y. 382 , 42 N. E. 982 , 52 L. R.

Consquently it was held that where the subject of a contract of sale at a fixed price is an article to be manufactured by the vendor, having a limited demand and no real market,, the vendor was-entitled to recover the difference between what it would cost him to manufacture and deliver the article under the contract and the contract price. To the same effect are the cases of Gordon Malting Co. v. Bartels Brewing Co., 206 N. Y. 529 , 100 N. E. 457 , 461; Belle of Bourbon Co. v. Leffler, 87 App. Div. 302 , 84 N. Y. Supp. 385 ; Snell v. Remington Paper Co., 102 App. Div. 138 , 92 N. Y. Supp. 343 ; Lehmaier v. Standard Specialty Co., 123 App. Div. 436 , 108 N. Y. Supp. 402 ; Isaacs v. Terry, etc., 125 App. Div. 534 , 109 N. Y. Supp. 792 ; Meyer Bros. Drug Co. v. McKinney, 137 App. Div. 541 , 121 N. Y. Supp. 845 .

The facts in this case bring it squarely, we think, within the rule enunciated above. The defendant was not technically the manufacturer of the cars contracted to be purchased, but it stood, so far as its relations to the plaintiff were concerned, in that position. Under contract with the factory the defendant took its entire product. It controlled every car turned out by the factory. In other words, the Reo Manufacturing Company manufactured for the defendant alone, and was prepared and equipped to supply the defendant with all cars which it could sell. The evidence shows that the Reo Manufacturing Company in fact had on hand the constituent parts of the different styles of cars capable of being assembled and made into a completed motor car on short notice, and in time to have fulfilled any orders received from the defendant. It will be noted that the contract between the plaintiff and defendant distributed the time of purchasing the 420 cars in question over the entire year, specifying the number and kind to be taken each month, and further providing that shipping specifications should be given 30 days in advance. This timely notice was undoubtedly required so that the defendant might have ample opportunity to make the necessary arrangements with the factory for the proper assembling of the parts into the completed machine. Consequently the defendant had the same right to assert against the plaintiff the same rule of damages as would be applied had the contract ran direct to the factory instead of to the defendant.

The amount of the damages was absolutely definite and certain, and was in no sense speculative. The defendant got the cars at a specified price from the factory. The plaintiff agreed to buy from the defendant for another fixed price, and the difference between these prices on the number of cars not taken was a simple matter of computation. It is only proper to add at this time that the overhead charges or expense of the defendant, the evidence showed, would have been in no way increased by the fulfilling of the contract with the plaintiff.

The number of models K and J mentioned in the contract, the jury were instructed to eliminate from their consideration in arriving at

The motion for a new trial is therefore denied.

So ordered.